Propanol Prices Experience Upward Pressure

13 January 2003 00:00  [Source: ICB Americas]

With demand improving and raw material costs going up, the price of propanol and derivatives is under up-ward pressure. Both Dow Chemical Company and Eastman Chemical Company have launched increases, but Celanese Chemicals has taken a wait-and-see approach.

Effective January 1, both Dow and Eastman launched a 2 cent per pound increase for propanol and its main derivatives, such as propyl acetate and propionaldehyde. Celanese however, has elected to hold off on a first quarter increase. "We will try to implement the full extent of our October 1 increase of 3 cents per pound," says Steve Friede-wald, global market manager of solvents for Celanese. He deemed the October increase partially successful. Mark Bassett, business commercial leader for coatings and ink solvents for Dow called his company's October 1 increase relatively successful.

The price increases are coming amid firm demand. "Demand has been healthy in solvents and pretty flat elsewhere. Overall, demand has been steady and has met our expectations, " states Mr. Friede-wald. " Mr. Bassett concurs. "Last year was tighter than 2001, but that was a pretty bad year, all in all," he says. "This year we expect to see demand continue to increase over 2002."

Besides steady demand, propanol has recently begun to feel increasing pressure from feedstock costs, notes Mr. Friedewald. The main feedstocks are ethylene and natural gas or naphtha. "Feed-stocks have been rising throughout the year and are forecasted to continue to rise, but the question is how much," adds Mr. Bassett. "What happens in the Middle East will determine a lot of what happens with ethylene and natural gas."

Ethylene prices have settled up a penny per pound for December and producers have increases on the table from 3 cents to 5 cents per pound based on rising crude oil costs. Natural gas has spiked above $5 recently after hovering in the $3 range for some time.

Although rising feedstock costs and firm demand provide justification for the first quarter price increase, lack of broad support from all producers casts doubt on its ultimate success. "We think there is good reason for the price increase," Mr. Bassett explains. "The raw material situation justifies it and the supply/ demand picture justifies it. It's now more of a question of when rather than if prices will actually rise."

Future price increase have also not been ruled out. "The industry is under earnings pressure and demand has been quite reasonable. In that scenario, you would expect prices to move up." Dow also anticipates further increases. "With the supply/demand balance tightening and raw materials continuing to climb, I would expect to see pressure to increase pricing," says Mr. Bassett.

Solvent applications, either directly or as n-propyl acetate, accounted for 73 percent of demand for n-propanol in 2001, according to Menlo Park, Calif.-based SRI International. The principal markets for propanol and n-propyl acetate are as solvents in liquid flexographic and rotogravure inks. These solvents function to dissolve the resin, control the viscosity and modify the drying rate. They are also used to help prevent smearing and ink accumulation on the printing presses, according to SRI.

Future consumption of n-propyl acetate will be affected by the development of satisfactory water-based inks in response to environmental regulations on volatile organic compounds. Flexo-graphic inks have largely converted to water-based formulations; the remaining end uses employing solvent-based inks are unlikely to be converted in the near future, according to SRI. Roto-gravure fluid inks are still largely solvent-based. The main reason involves press speed; use of slow-drying water-based inks reduces printing speeds. Therefore, rotogravure conversion to water-based formulations will be minimal in the near future.

Because of its relative inertness and low odor, propanol is preferred for packaging in food contact applications and for processes that contact rubber printing rollers and plates, according to SRI. The growth of waterborne flexographic inks has not adversely affected propanol, since these inks are formulated with low levels of propanol, notes SRI. Other solvent applications of propanol include surface coatings, in-secticide formulations and carboxy-methylation of cellulose. Propanol also acts as a dispersing agent in cleaning preparations and floor waxes.

ICIS Copyright © Reed Business Information 2009

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